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LONDON MARKETS: Retail, Housing Shares Yank FTSE 100 Into The Red

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A flip lower in retail and housing shares after the U.K. government discussed budget plans pushed the benchmark FTSE 100 lower on Wednesday.

The blue-chip stock benchmark fell 0.5% to 6,788.40, giving up a rise of as much as 0.9%, as only the industrial sector hung in positive territory.

The reversal got underway after U.K. Chancellor of the Exchequer Philip Hammond talked about the Conservative government's budget for the first time since the U.K. voted to leave the European Union in a June referendum. In terms of the short-term growth view, gross domestic product is expected to slow to a rate of 1.4% in 2017 compared with a previous view of 2.2%. Meanwhile, the government plans to launch a GBP23 billon fund for infrastructure and innovation to run over the next five years.

Retail stocks dropped as the government plans to raise the National Living Wage to GBP7.50 an hour from GBP7.20 an hour, beginning in April 2017. Shares of supermarket chain Tesco PLC (TSCO.LN) briefly fell to the bottom of the FTSE 100 as they lost 2.5%. Apparel and accessories retailer Next PLC (NXT.LN) gave up 1.7% and electronics seller Dixons Carphone (DC.LN) moved down 1.5%.

Housing: The government will launch at GBP2.3 billion housing infrastructure fund to aid in providing high-demand areas with 100,000 new homes, and will offer GBP1.4 billion for an extra 40,000 affordable homes.

"Affordable homes tend not to be the cash cows of many development companies. Not to say they don't participate in these kind of schemes, but it doesn't necessarily move thedial in terms of their revenues a great deal," said Ken Odeluga, market analyst at City Index. "I think that's why the market isn't reacting with a great ebullience to that particular part, but it's a worthy measure to be announced."

Hammond also said the government will ban fees imposed upon renters by letting agencies "as soon as possible." Shares of real-estate agents had been down earlier Wednesday on market talk that such fees would be reduced. Foxtons Group PLC (FOXT.LN) shares tumbled 14%, while Countrywide PLC (CWD.LN), the U.K.'s largest real estate agency, sank 6.2%.

The average fee charged by agents licensed by the Association of Residential Letting Agents is GBP202 per tenant. If fees are banned, landlords will end up recouping the costs through higher rents, the industry bodysaid early Wednesday.

(https://twitter.com/arla_uk/status/801372394573139968)

Miners: Mining shares were mixed after broadly advancing earlier Wednesday, "with iron ore prices rocketing as investors take an ultra-optimistic view of future demand," said Rebecca O'Keeffe, head of investment at Interactive Investor, in a note to clients.

Goldman Sachs lifted its iron ore price forecasts over the next three, six and 12 months, with analysts saying in a research note Wednesday that the 2016 market for the metal has "benefitted from better fundamentals and favorable technicals."

O'Keeffe cautioned against counting too much on increased demand for commodities from the U.S. following the election victory for Donald Trump. The Republican president-elect has pledged to raise spending on infrastructure, seen as potentially driving that demand. But for one thing, the U.S. gets most of its steel from scrap, O'Keeffe noted.